Funds Hike Bullish Positioning In Gold By More Than 500%
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(Kitco News) - Large speculators hiked their bullish posture in gold futures more than five-fold during the most recent reporting week for data compiled by the Commodity Futures Trading Commission.
Gold prices have fallen since the May 14 cutoff for the most current CFTC report, however, meaning net length may have well declined since, traders said.
During the week-long period to May 14 covered by the last report, Comex June gold rose by $10.70 to $1.296.30 an ounce, while July silver fell by 11.4 cents to $14.812. Since, June gold has fallen to $1,275.50 as of 9:14 a.m. EDT Monday.
Net long or short positioning in the CFTC data reflect the difference between the total number of bullish (long) and bearish (short) contracts. Traders monitor the data to gauge the general mood of speculators, although excessively high or low numbers are viewed by many as signs of overbought or oversold markets that may be ripe for price corrections.
The CFTC's "disaggregated" report showed that money managers stood net long by 52,546 gold-futures contracts as of May 14, compared to 9,547 in the week to May 7. There was a slew of fresh buying, as reflected by a 35,492 increase in total longs. There was also some short covering, as reflected by a 7,507 decline in gross shorts.
George Gero, managing director with RBC Wealth Management, commented that the rise in the net long was foreshadowed by the number of rising open positions reported daily by Comex. This occurred at a time when prices were rising – thus suggesting fresh longs – amid global political and economic worries.
“On the other hand, the fact we’re in the 98 area for the dollar index keeps gold from running [even higher],” Gero said.
TD Securities commented that gold speculators increased their net length during the most recent CFTC reporting period as prices briefly topped $1,300 an ounce when so-called risk assets were under pressure.
“Traders were convinced to buy the yellow metal amid a spike [in] equity volatility, induced by the latest trade-war-inspired sell-off, while interest rates also started to reprice Fed cut probabilities near 80%,” TDS said.
TDS also commented that gold’s upside has remained capped by U.S. dollar strength.
“Further, despite a more hard-line stance in the Chinese media with respect to trade negotiations, markets have started to take a more optimistic view,” TDS said. “But, the growing risks of deterioration in the U.S. data, for which the trade war could be a near-term catalyst, could prompt money managers to grow their allocations to the yellow metal in the not-too-distant future.”
Meanwhile, there was not a big change in silver positioning as the fresh buying was nearly as much as the fresh selling. Money managers increased their net short in silver to 14,197 futures contracts from 14,139 lots the previous week. Gross longs rose by 924 lots, while total shorts edged up by slightly more – 982.